Saturday, June 23, 2012

The Gold Standard of Economic Activity Statistics, Electricity Production, Is Being Faked In China

From the New York Times via CNBC:

Chinese Data Mask Depth of Slowdown, Executives Say

As the Chinese economy continues to sputter, prominent corporate
executives in China and Western economists say there is evidence that
local and provincial officials are falsifying economic statistics to
disguise the true depth of the troubles.

Record-setting mountains of excess coal have
accumulated at the country’s biggest storage areas because power plants
are burning less coal in the face of tumbling electricity demand. But
local and provincial government officials have forced plant managers not
to report to Beijing the full extent of the slowdown, power sector
executives said.

Electricity
production and consumption have been considered a telltale sign of a
wide variety of economic activity. They are widely viewed by foreign
investors and even some Chinese officials as the gold standard for
measuring what is really happening in the country’s economy, because the
gathering and reporting of data in China is not considered as reliable
as it is in many countries.

Indeed,
officials in some cities and provinces are also overstating economic
output, corporate revenue, corporate profits and tax receipts, the
corporate executives and economists said. The officials do so by urging
businesses to keep separate sets of books, showing improving business
results and tax payments that do not exist....MORE